Fortune Article on Mickey Drexler Has Arrived!

As mentioned in yesterday's post (J.Crew's Mickey Drexler: King Of Cool), Fortune is having an article on Mickey Drexler. The following is a portion (of the lengthy) article. (Click here for the article in its entirety.)

Retailing icon Mickey Drexler doubles down
By John Brodie
August 20, 2008

...Drexler is wearing dark-blue jeans and -you guessed it- a blue button- down shirt. He then proceeds to engage in a straw poll on what color shirts the men in the room are wearing. The majority are wearing blue or white.

"You know what ends up on the markdown racks? All the weird colors. Guys don't wear orange or citron." The point, or what in Drexler-speak is known as the "big call-out," is to watch out for over-assortments (the same item in too many colors).

Today is the moment in the life of a garment when art meets commerce. The occasion is the Spring 2009 Men's Finalization Meeting, a quarterly ritual where the designers present rough drafts of future items to their colleagues in sales, whose job it is to move the chinos, gingham-checked shirts, and desert boots through the company's 267 retail stores, catalogs, and Web site. Together, the designers and the sales team will decide which looks are home runs and which will be shelved. (Among the verdicts: black chino shorts are in; over-assortments of madras shorts are out.)

The merchandise must be both fresh and popular, because the current retail environment, says Drexler, is the worst he's seen during his 40 years in the business. He wants his merchants, who decide how many of each piece J. Crew should produce, to be smarter than ever.

"Don't be buying out of emotion. Buy less if you love something but feel it's a risky item. We don't want overstock. And remember: No profit, no fun!" he says by way of a benediction.

This little speech might come across as the pedantry of a CEO in love with his own instincts and the sound of them coming forth, but Drexler has the track record and passion to back up the bluster. By his own admission, he is a control freak, happiest when he is involved in every facet of J. Crew's merchandise. ...

...What does Drexler's trend-spotting instinct tell him now? He thinks the dominance of the big-name designer is played out. He's stacking his chips on quality goods at a fair price, repositioning J. Crew as a luxury-for-less alternative. ...

As confident as Drexler is, the timing is risky. While J. Crew is offering a better value proposition, it's going upscale at a moment when the average American consumer is scaling back on discretionary spending. In May the company revised its earnings guidance for the rest of the year, projecting that comparable-store sales growth will be flat or in the low single digits, which sent the company's stock from $49 in May to $28 in August.

And therein lies Drexler's dilemma. Wall Street wants to see growth, but the CEO doesn't want to go on a store-building binge, because if the chain is too far-flung even someone with Drexler's bandwidth won't be able to walk into every one of the stores - something he loves to do - and quiz associates about what they're seeing and hearing on the sales floor ("Which competitors' shopping bags are we seeing?" "Are customers complaining about designer prices yet?").

..His logic is straightforward: Why can't an American retailer use the same Italian mills and fabric makers as European designers but then deliver a more affordable alternative to goods sold at department stores and boutiques?

"Designer goods have become much too available, either through their own distribution or through logo counterfeiting. I see the world moving away from carrying a bag around with the designer's initials or designer's logo," says Drexler. "The more you see of anything, the less special it becomes. It's kind of like the first slice of pizza vs. the sixth. The first you're like, 'God, this is amazing!' The sixth you're like, 'Enough already.' So I think there's an opportunity for us to deliver stylish, quality goods like a woman's blazer for $350, compared with a designer one for $2,500."...

...A major change at J. Crew since Drexler took over is that the company's design team has more influence. Jenna Lyons, the creative director, has been at the company since 1991 but lately has become a rising star in the design world. ... Women she considers chic are wearing her handiwork and supermodel Inguna Butane will be in an upcoming catalog. Since Drexler's arrival she has also been able to source textiles from better Italian mills, including Ratti, which provides prints to some of Europe's leading designers.

She will be debuting an upscale line called J. Crew Collection this fall. More important, the relationship between designers and merchants at J. Crew has changed. "We used to get pretty serious, heavy direction from the merchants in terms of what they needed. Now we get to completely design a line - we get to dream the dream," says Lyons. ...

...Selling directly to customers, either through catalogs (of which there are 13 a year) or over the web, is more the focus at J. Crew. Compared with the flat or slow revenue growth expected from the stores this year, the company is predicting direct-sales growth in the high single digits. Last year 28% of the company's total revenues came from web and catalog sales. That's markedly higher than competitors, including Talbot's (19%), Urban Outfitters (14%), and Limited Brands (which includes Victoria's Secret and clocks in at 14%).

Wall Street likes to see healthy direct sales because that's a way to show growth without real estate costs, and as more and more computer-literate progeny of the baby-boomers graduate to adult brands, online shopping will continue to grow. The downside is that when there's a hiccup with the Web site, as there was during an upgrade to improve customer service this summer, the Street reacts. On July 31, Drexler and Tracy Gardner, J. Crew's president of retail and direct sales, posted an apology. "We've made some mistakes ... too many, in our mind ... We know we've let you down." This cyber apology may have made customers feel better, but it knocked two bucks off the stock....

What do you think of the article? Do you like Mickey Drexler more or less after reading it? Do you agree or disagree with some of Mickey's comments and decisions for J.Crew?